No alternative fuel mixture credit for butane/gasoline - KPMG United States
Share with your friends

No alternative fuel mixture credit for butane and gasoline mixture

No alternative fuel mixture credit for butane/gasoline

The IRS today released an advance version of Rev. Rul. 2018-02 that addresses whether a mixture of butane (or other gasoline blendstock as defined in Reg. section 48.4081-1(c)(3)(i)) and gasoline is a mixture of two taxable fuels. The IRS ruled that a mixture of butane and gasoline is not an alternative fuel mixture and does not qualify for the alternative fuel mixture credit under section 6426(e).


Related content

Read Rev. Rul. 2018-02 [PDF 21 KB]


The facts considered in Rev. Rul. 2018-02 by the IRS are as follows:

  • A claimant (producer) mixes gasoline and butane and sells it for use as a fuel. 
  • The producer claimed the alternative fuel mixture credit under section 6426(e) for an open tax period ending on or before December 31, 2016, on the premise that the gasoline in the mixture is a taxable fuel and the butane in the mixture is a form of liquefied petroleum gas (LPG), an alternative fuel. 
  • The producer indicated in its claim that the basis for its position that butane is a form of LPG is the language in Chapter One of IRS Publication 510, “Excise Taxes (Including Fuel Tax Credits and Refunds),” which provides, in the “Other Fuels (Including Alternative Fuels)” section, that “[l]iquefied petroleum gas includes propane, butane, pentane, or mixtures of those products.” 

IRS’s conclusion

The IRS noted that butane is and has been a taxable fuel since before the enactment of section 6426(d) and (e) in 2005. A mixture of butane, a taxable fuel, with gasoline, a taxable fuel, is a mixture of two taxable fuels, not a mixture of a taxable fuel and an alternative fuel, as required by section 6426(e)(2). Therefore, the IRS concluded that the producer may not claim the alternative fuel mixture credit under section 6426(e) for the mixture of butane and gasoline.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


Request for proposal